Grace Files to Emerge From Bankruptcy

22 November 2004 00:01  [Source: ICB Americas]

After more than three years in bankruptcy, W. R. Grace & Co. has finally filed a plan of reorganization to emerge from Chapter 11, as well as a disclosure statement and other documents. However, the plan was filed without consensus among the creditors, equity holders and representatives of future asbestos claimants.

Shares of Grace, which have been on a tear, fell 41 cents to $14 on the news. Grace’s stock has risen sevenfold in less than a year, as an asbestos resolution favorable to shareholders has appeared more and more likely.

The plan calls for the establishment of a trust to handle all pending and future asbestos-related claims. Grace has requested that the bankruptcy court conduct an estimation hearing to determine the amount to be paid into the trust to satisfy the estimated liability and expenses. The trust amount would be capped to the amount determined at the hearing.

Grace’s reorganization plan provides that the maximum payment for all asbestos-related liabilities and expenses cannot exceed $1.613 billion, which would fund over $2 billion in claims over time.

The claims and expenses of the asbestos trust would be funded with $512.5 million in cash, plus interest accrued at 5.5 percent from December 21, 2002, 9 million shares of Sealed Air Corp. stock (currently worth $467 million), and an undetermined amount of Grace stock, up to 50.1 percent of the voting shares.

Other claims such as environmental liability, trade payables and bank debt, estimated at $1.2 billion, would be paid either in cash, or 85 percent in cash and 15 percent in Grace stock. Current shareholders face dilution as share offerings are stipulated under the plan.

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